New Vendors. Do you have a consistent process when bringing on new vendors? How are you protecting yourself from liability and exposure?
All dealerships rely on many different vendors in order to "get the job done". Some jobs are relatively small scale in the scheme of things, while others may have a major impact on your daily operations. No matter how big or small the job is, the vetting process should remain the same.
By creating and following a consistent process you will be able to better protect your customers and eliminate liability on your part.
Here are your "must haves" from any new (or existing) vendor:
- W-9 - there are serious penalties involved when you pay a vendor to do work for your company and do not have a signed W-9 on file. Click here for more information and the newest version of the W-9 (2014).
- Verify their corporation is active. Some states have a website that allows you to search by name or EIN to verify that a corporation exists and is active. This link may may be helpful in finding your state's website to verify this information
- Hold Harmless Agreement - please consult with your attorney and have them specifically draw up an agreement that holds you harmless from damages, accidents, etc. caused by a vendor. It should be signed by the owner of the company that is doing business with you. Click here for a sample.
- Certificate holder - Require a certificate of insurance, naming the Company (and/or it's affiliates) as a certificate holder, addressed to your AP dept. This will guarantee that you are notified of any lapses of coverage by the vendor's insurance company.
- Type of insurance - is the vendor properly insured for the type of work they are doing? Make sure all vendors that come onto your property and/or drive or repair your vehicles are properly insured. This will ensure that in case of accident, damage or injury, their insurance is primary.
- Establish limits of liability that you will accept from your vendors. Ex: you may require your tow company to have a $1,000,000.00 liability policy, while your window tinter should be covered for $50,000.00.
- Lastly, require invoices with pre-printed numbers. This avoids duplication and helps maintain strong internal controls.